Debt Load Ratio

Debt load is the total debt you owe. This includes such things as mortgage payments, any loans you've got, credit card debt and even any money that you might owe to family and friends. Debt load is one factor in determining debt-to-income ratio, an important figure when it comes to borrowing money and getting good interest rates.

Debt-Income Ratio

Knowing your debt load isn't enough. You also need to know what your debt-to-income ratio is. This is the figure that tells you how much money you owe, how much money you're bringing home, and whether or not you're carrying too much debt. The easiest way to figure that out is to add up your debts, and divide that number by your monthly salary. Then you'll take that number and move the decimal point over two points to the right and that gives you the percentage of your debt-to-income ratio. For example, if your debt load is $250 and your monthly salary is $1000, divide $250 by $1000, which will give you 0.25. Move the decimal point over two points to the right and you have 25 percent debt-to-income ratio.

Percentage

A debt load that keeps your debt-to-income ratio below 10 percent is really good. A person with that kind of debt load would probably not have any problems borrowing money. However, when the debt load is high enough to make the debt-to-income ratio hit between 10 percent and 20 percent, lenders are still probably going to loan money, but there might be more reluctance on their part. Anything over 20 percent most likely is going to carry a higher interest rate. This is just one reason why it's so important to keep your debt load as low as possible.

Load Reduction

One way to reduce your debt load would be to take any credit cards that have high interest rates and transfer them to a card with a lower interest rate. Many new credit card offers have a "transfer" period of between six months to 12 months, where there is a very low interest rate provided. By taking advantage of the low rates and paying down the debt during the time period, the debt load becomes lower and in turn, this reduces the debt-to-income ratio, as well.

Unemployment

Unemployment can cause a severe strain on debt load ratio. When a person is unemployed, daily survival takes priority over paying bills and this causes the debt load to balloon. The sooner a person finds employment of any sort, the sooner he can attack the debt load once again. In addition, if things spiral too far out of control, it's possible to seek help from a consumer credit counseling agency.